Brokers

In this chapter of our Annual Insurance Review 2024, we look at the main developments in 2023 and expected issues in 2024 for Brokers.

Key developments in 2023

Claims inflation has been a key theme throughout 2023. Inflationary pressure has required brokers to pay close attention to the adequacy of sums insured and led to an increased number of claims as well as a rise in the costs of insurance claims. One notable example of this relates to the dramatic rise in the cost of building materials, labour shortages and supply issues, which has led to increased rebuild costs for buildings as well as an increased risk of underinsurance.

There has also been a rise in the number of claims against brokers relating to underinsurance for business interruption losses. One such example is the recent judgment in Infinity Reliance v Heath Crawford, which serves as a useful reminder of brokers’ duties to policyholders. These include the need for brokers to make sure they have a clear understanding of a policyholder’s business and are asking the right questions in order to identify the main risks and advise on appropriate cover. This applies as much on renewal as when placing a client’s insurance for the first time.

Environmental, social, and governance (ESG) has remained a key theme throughout 2023, with brokers adapting to placing ESG risks in an evolving market. In addition, an increased focus on ESG topics amongst a wide range of professionals has led to increased risks for brokers. Examples include failing to advise policyholders sufficiently as to what they need to disclose in relation to ESG and not recommending cover that fits with the policyholder’s requirements in relation to ESG.

What to look out for in 2024

Inflation and the cost-of-living crisis are issues that look to remain, and brokers will continue to need to ensure they are obtaining adequate insurance that reflects their client's needs in light of these challenges. Clients will rely on brokers to navigate obtaining appropriate insurance during these volatile times, particularly if the budget for it decreases. Brokers should be mindful of their duties and ensure to carefully explain cover and the options for cover to their clients, and also to understand what is essential for a client's business. 

AI continues to grow, and the incorporation of it into businesses and professional services, with some large law firms even developing their own AI. Brokers will need to ensure that their clients who are exploring AI are adequately covered in respect of it, including from a regulatory and privacy perspective. 

ESG will remain central in respect of its impact on insurance and potential claims against brokers. Brokers will need to be across Insurers' expectations in respect of an Insured's ESG obligations or commitments in order to properly present the risk, and also the impact ESG can have on producing or placing terms on behalf of clients, particularly in areas such as construction.  

Written by Elizabeth Singleton & Alice Tittensor.